MABUX: Bunker market this morning, Sep 21

The Bunker Review was contributed by Marine Bunker Exchange (MABUX)

MABUX World Bunker Index (consists of a range of prices for 380 HSFO, VLSFO and MGO (Gasoil) in the main world hubs) continued firm upward trend on Sep.18:

380 HSFO: USD/MT 296.64 (+2.88)
VLSFO: USD/MT 347.00 (+7.00)
MGO: USD/MT 417.85 (+6.74)

Meantime, world oil indexes mixed on Sep.18 after Libyan commander Khalifa Haftar said a blockade on Libyan oil exports, which has been in place since January, would be lifted.

Brent for November settlement decreased by $0.15 to $43.15 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for October delivery rose by $0.14 to $41.11 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $2.04 to WTI. Gasoil for October delivery lost $0.25 – $339.75.

This morning, global oil indexes do not have any firm trend so far.

Pre-blockade Libya was producing around 1.2 million bpd. It is unclear, however, how quickly Libya could reach that level again.

OPEC and the International Energy Agency reported negative news for the oil market last week. Both authorities revised their oil demand forecasts for this year, and both revised them downwards. But it is not just demand that will continue to weigh on oil prices. Supply is excessive and likely to remain so until the end of next year. OPEC said that it expected oil demand this year to shrink by 9.5 million bpd. That’s an upward revision of 400,000 bpd, from an expected contraction of 9.1 million bpd in August. The IEA in turn said it expected demand this year to contract by 8.4 million bpd. That’s a larger demand growth contraction than they were anticipated in the previous month, when the oil industry body expected a smaller contraction of 8.1 million bpd.

OPEC also considers a resurgence in Covid-19 cases in some countries could further dampen oil demand and interfere with a decline in oil inventories. Cases have been rising in many European countries, total infections in India have passed 5 million, and new cases are on the rise in some U.S. states.

Saxo Bank said, the faltering oil demand recovery and the lack of a COVID-19 vaccine will likely push the oil price recovery to $50 a barrel into 2021, as inventories continue to pile up in 2020 amid weak refinery margins and demand. Meantime, Bank doesn’t see too much upside potential for oil prices in the near term as fundamentals remain weak. Bank sees Brent crude oil settling into a new lower range around $40/b before eventually moving higher into year end and 2021.

Goldman Sachs in turn predicted a market deficit of 3 million barrels per day (bpd) by the fourth quarter and reiterated its target for Brent to reach $49 by the end of the year and $65 by the third quarter of 2021. Swiss bank UBS also pointed to the possibility of undersupply, forecasting Brent would rise to $45 a barrel in the fourth quarter and to $55 by mid-2021.

The United States maintained its global status as the leading supplier of crude oil in July, ahead of Russia and Saudi Arabia.  U.S. crude oil production rose in July back up to above 11 million barrels per day (bpd). Production in June had also increased month over month after the May figure of 10 million bpd—the lowest U.S. monthly production since late 2017.  According to OPEC+ agreement, Russia and Saudi Arabia have cut their production and keep it at 9 million bpd each until the end of this year. Meanwhile, in July, Russia kept its place as the world’s second-largest oil producer ahead of Saudi Arabia.

The number of oil rigs in the United States fell by 1 to 179. The total number of active oil and gas rigs increased for the week by 1, with oil rigs falling by 1 and gas rigs increasing by 2. Total oil and gas rigs in the United States are now down by 613 compared to this time last year. The EIA’s estimate for oil production in the United States rose for the week ending September 11 to 10.9 million barrels of oil per day, up from 10.0 million bpd in the week prior and 9.7 million bpd the week before that. While production has recovered in the last couple of weeks, U.S. oil production is still down 2.2 million bpd from its all-time high reached earlier this year.

We expect bunker prices do not have any firm trend today and may change insignificant and irregular in a range of plus-minus 1-3 USD.